CEO John Legere promises 5G to 96 percent of rural Americans. House members are skeptical.
Lawmakers representing rural districts are skeptical about T-Mobile's promise that its $26 billion merger with Sprint will bring lightning-fast 5G wireless broadband to their hometowns.
And they weren't shy about letting the companies' executives know during a hearing before the House Energy and Commerce Committee on Wednesday.
Rep. Peter Welch, a Democrat from Vermont, criticized T-Mobile and Sprint for not actually delivering the 3G and 4G service in Vermont that the companies own coverage maps say they offer. And he said he was doubtful the new T-Mobile would actually deliver on its promise to bring 5G to his neck of the woods.
"In a lot of Vermont, we have no G," he said. "So I'm a skeptic."
T-Mobile CEO John Legere and Sprint Executive Chairman Marcelo Claure testified for three hours Wednesday, as lawmakers grilled the companies over their big claims that the merger would benefit consumers. The executives promised that the new company will lower prices and create thousands of new jobs, starting "on day one."
Most importantly, they said the merger will allow the "New T-Mobile" to accelerate the deployment of super fast 5G wireless technology, which Legere claims will finally bring broadband to 59.4 million rural residents or 95.8 percent of the estimated 62 million rural residents in the US. This is a big deal considering that roughly 39 percent of rural Americans lack access to high-speed broadband today. 5G is the next generation of wireless that's expected to be up to 100 times faster than current wireless technology.
"The broad geographic reach of new T-Mobile's 5G network will finally bring rural communities into the mobile broadband era," Legere said. "With all the concerns about rural America, this transaction is the best path forward to solve the issues with rural America."
The deal, which was proposed last April, combines the nation's third- and fourth-largest wireless companies. It would create a company that would be roughly the same size as AT&T and Verizon . While Congress doesn't have the authority to accept or deny the merger, it does provide oversight to the Federal Communications Commission and the Department of Justice, which are required to give their blessings before the deal can be completed.
Carri Bennet, who was representing the Rural Wireless Association, pointed out in her testimony that T-Mobile has consistently done a poor job of serving the rural community.
"In the last 20 years, these companies have not made one iota of effort to build out to rural America," she said.
But Legere argued the company didn't have the low-band wireless spectrum or the money to build in rural America until now. The company was the largest winner of spectrum in the 600 MHz auction that ended in 2017, and it's just now deploying service using that spectrum, much of it in rural regions, he said. But without Sprint, the company will not have the capital to build 5G in these regions, he added.
Legere said that a merger with Sprint will allow T-Mobile to "supercharge" its 5G deployment, allowing it to build a more robust 5G network more quickly. It would also help the US win the race to 5G, beating rivals like South Korea and China, he said.
But Phillip Berenbroick of Public Knowledge, who testified at the hearing against the deal, pointed out in his testimony that this was a similar claim made by AT&T when it tried to merge with T-Mobile in 2011. Back then, the argument was that AT&T needed T-Moblie in order to roll out a robust 4G LTE network. The FCC and DOJ each rejected those claims. And he said they should do the same thing here.
But Legere said his critics are missing the point.
"We are not saying we cannot get to 5G without Sprint," he said. "What we are saying is that together, we can build a world class 5G network with breadth and depth well beyond anything we could do alone."
Network coverage and 5G weren't the only things concerning some lawmakers. There were also questions about T-Mobile's commitment to maintaining Sprint's contracts to provide wholesale service to resellers delivering Lifeline service. Lifeline is the federally subsidized program to provide phone service to low-income individuals.
They were also worried that T-Mobile won't honor its pledge to keep prices low. After its failed merger with AT&T, T-Mobile made itself a price leader in the market and its aggressive Uncarrier marketing forced its bigger rivals, AT&T and Verizon, to change how they do business. But some lawmakers fear those benefits could go away if the two were to merge.
Legere assured them that the Uncarrier mantra of delivering more for less is here to stay.
"Being a maverick is in my DNA and T-Mobile's DNA," he said. "But it is also central to our successful business strategy and to the business plan of the combined company."
The companies also say the combination would allow them to better compete -- not only with Verizon and AT&T, but also with cable providers, such as Comcast. But if the merger were to be denied, Legere said the company would not have the money to compete in the home broadband market.
Lawmakers also raised security concerns about any involvement T-Mobile's and Sprint's foreign-owned parent companies might have with Chinese telecom gear makers Huawei and ZTE. Many experts suspect Huawei and ZTE have links to the Chinese government. Legere, however, reassured them not to worry.
"Let me be clear, we do not use Huawei or ZTE network equipment in any area of our network," he said. "And we will never use it in our 5G network."
The DOJ has charged Huawei with stealing trade secrets in the midst of a trade war between the US and China countries. National security officials in the US have been trying to discourage other countries from allowing Huawei equipment to be used in building 5G networks around the world.
There was no mention of the 52 times T-Mobile executives, including Legere himself, have stayed at the Trump International Hotel in Washington, DC, as The Washington Post reported. Sen. Elizabeth Warren, a Massachusetts Democrat, and Rep. Pramila Jayapal, a Democrat from Washington state, sent Legere a letter last week questioning whether T-Mobile has been trying to curry favor for their deal.
First published on Feb. 13 at 6 a.m. PT.
Update 1:41 p.m. PT: Adds information from the House Energy and Commerce subcommittee hearing.
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